06-07 Position Statement As On Jan07

INSPECTION OF RANGE – METAGALLI EAST BY

SHRI. M.M.VISWANATH Assistant. COMMISSIONER OF CENTRAL EXCISE, Technical Section, Headquarters, Mysore. ON 08-03-2007

POSITION STATEMENT OF RANGE `METAGALLI EAST’ MYSORE I DIVISION BY SHRI.M.M.VISWANATH, ASSISTANT COMMISSIONER OF CENTRAL EXCISE, TECHNICAL SECTION, HEADQUARTERS, MYSORE Date of last Inspection

: 04.8.2006 by Shri. Tamizh Vendan,. Asst. Commr of C.Ex. I division

Date of Present Inspection

:

Name of the Officer Incharge and from when posted

08.03.2007

: Sri. Satish.V.I, Supdt. of C.Excise from 07.06.2005 and is assisted by the following staff:

INSPECTORS from 08.06.2006 from 12.06.2006

1. Sri. D.Anthony Raj 2. Sri. J.R.K.Haran

SEPOY 3. Sri.D.Raju

from 28 .06.2006

Accommodation : The Range office is situated within the Hqrs Office premises at Vinaya Marga, Siddarthanagar, Mysore- 570 011. The present accommodation for Range staff is sufficient. 5. Staff Position : Designation of the officers Sanctioned strength 1. Superintendent 01 2. Inspectors 02 3. Sepoy 01

Working strength 01 02 01

Vacancy Nil Nil Nil

RANGE – METAGALLI EAST

POSITION STATEMENT OF RANGE `METAGALLI EAST’ MYSORE I DIVISION AS AT THE END OF January 2007 (a) Comparision of Actual Revenue realisation of revenue with target fixed for the last 3 years: (Rs. in Crores) Sl.No. 01 02

Year 2003-2004

Target 32.0

Revenue realised 29.5

Excess/Shortfall -2.5

(+/- %) -7.9

2004-05

37.0

34.1

-3.0

-8.0

30.43

1.4

4.9

21.11 (including Falcon Tyres)

-3.89

-15.56%

03

2005-06

04

2006- 2007(Target 30 Crores) Upto 01/2007

25 (Pro rata)

The target fixed for the financial year 2006-2007 is Rs.30 Crores . The pro-rata target upto 01/2007 is Rs.25 Crores. As against this the actual revenue realised upto January 2007 Rs. 21.11 Crores. The revenue realised in PLA when compared with the prorata target is less by 15.56% in the current year due to increased Cenvat utilization.

(b) Table showing utilisation of credit of duty vis-à-vis PLA (Rs. In Crores) Year

PLA

Cen

CEN%

(2003-2004) (2004-2005) (2005-2006)

29.47 34.05 30.43

29.27 33.51 43.14

49.83 49.60 58.72

(2005-06) Upto January

23.54

34.65

59.55

(2006-2007)Upto January

21.11

54.34

72.02

Revenue realised for the year 2005-06 is Rs. 30.43 Crores. PLA Revenue realized upto the month of January 06 was Rs.23.54 crores and realized upto January 2007 is

Rs.21.11 crores and there is a decrease in revenue to the tune of Rs. 2.43 Crores upto January 2007 in the current year, when compared to same period previous year ; In respect of Cen vat utilization, it was to the tune of Rs.34.65 Crores upto January 2006 as compared to Rs.54.34 Crores upto January 2007 , thereby resulting in a increased Cen vat credit utilization of Rs.19.69 Crores in this period . This can be attributed to the fact that most of the top units have credit at their disposal and have fully utilized them for payment of duty. UNITWISE AVAILMENT OF CENVAT OF THE MAJOR ASSESSEES (Figures in crores)

Credit availment of major assessees Falcon

Mypol

Bhoruka Geep

Triveni

Year 2003-04

10.26

3.25

6.14

1.86

1.26

2004-05

12.32

3.84

8.87

2.47

3.04

2005-06

15.83

2006-07 (UPTO January 07)

23.56

5.44 4.26

8.96 12.60

2.85 3.80

4.21 5.60

VALUATION PROCEDURES ADOPTED BY THE ASSESSEES. FALCON TYRES

This unit has been transferred to the jurisdiction of LTU, Bangalore with effect from 1.10.2006. the transaction value indicated on the factory gate invoice is final and based on contracted price. With effect from June 2006, all clearances of tubes to the market is based on MRP under Section 4A, while in respect of tubes directly cleared to OEM customers, the transaction value indicated on the factory gate invoice is final and based on contracted price.However, tyres are not being cleared under MRP and valuation continues under Section 4. . MYSORE POLYMES AND RUBBER PRODUCTS. The assessed has two types of clearances. Direct clearances to their customers wherein the transaction value is final as per invoice. Valuation is arrived by themselves as per their internal costing factors. b) Clearances to M/s CEAT and M/s GOOD YEAR on job work basis wherein the transaction value is based on contracted price and is final as per invoice and where the entire raw material is supplied by these two parties and valuation is arrived at by periodical cost sheets furnished by the said raw material supplier. The valuation procedure adopted by the assessee is well supported by the following two case laws: Ujagar prints vs UOI – 1989(39) ELT.493(SC) Dolphin labs vs CCE,ahmedabad – 2005(185)ELT.206(Tri-Del.) M/s GEEP BATTERIES, M/S BHORUKA ALUMINIUM AND M/S TRIVENI ENGINEERING.

These assesses clear their products as per normal section 4 Transaction value procedure based on their internal costings. All other medium and small assesses in the range also clear their products as per normal section 4 Transaction value procedure based on their internal costings. GROWTH OF INDUSTRIES : This Range comprises of units located in Metagalli Industrial Area, i.e on the right side of the K.R.S Road,starting from ESI Hospital upto the dead-end(till Railway track). In the north all the units falling on the right side of the K.R.S. Road, upto Mysore Taluk boundary as per the Trade Notice No. 77/2001 dtd 01.10.2001. There is no further scope for industrial growth in the area. The Total No. of units registered as on date are 23 manufacturing assessees,out of which : Major assesseee -4 Non SSI- 7 SSI units Duty paying–9 SSI units Exemption–2 M/s Falcon Tyres have gone to the jurisdiction of LTU, Bangalore from October 2006. POSITION OF ARREARS OF REVENUE : The total No. of cases pending as on January 2007 are 11 No’s and the amount involved is Rs. 133.66 lakhs . There is 1case in CESTAT amounting to Rs. 24.70 lakhs and balance of 10 cases amounting to Rs. 108.96 lakhs are under Non recoverable persuasive action. Non recoverable persuasive action cases: 10 No’s Karnataka Zinc: 1 case: Referred to Tax Recovery Cell. Since the factory is closed and the owner is not traceable Certificate under Sec 11 issued on 11.05.1995 was returned by D.C. Mysore(D) on 20.10.1997. KSFC has sold the assets and appropriated the sale proceeds towards their dues. Interest amount as reworked by divn.,there will be reduction of interest recoverable from 20.22 lakhs to 15.99 lakhs from August 1995 to september 2004, since interest was calculated from date of OIO and interest is only effective from Notification No. 21/95 CE (NT) dt. 29.5.95. Write off proposal submitted vide oc No. 391/04 dt. 26.8.2004 Banu Steels: 2 cases: Unit closed- Cases with Financial institutions Referred to Tax Recovery Cell. KSFC auctioned the unit for Rs. 10.55 lakhs against their dues of Rs. 15 lakhs, a letter has been addressed on 12.03.2004 to KSFC to remit the excise duty. Efforts were made to ascertain the property details of owners of the unit and in this regard the report was submitted to AC's office during January 2007, that the where about of the proprietor of the unit is not known and the arrears was proposed for write off. Ammu dye chem : 2 cases: Unit is closed since 1997, Party is not traceable. Certificate issued under Sec 11 on 21.11.97 and the D.C. vide letter dtd 05.12.2003 stated that the factory is being closed and they are unable to recover the arrears the matter has been referred to C.C Mysore zone for writing off duty and interest.As directed write off report submitted vide oc No. 201/04 dt. 10.5.2004. JSUN Engg: 2- cases:: Unit is not functioning and is seized by KSFC. Prosecution has been launched. Matter referred to KSFC by Recovery Cell. Meanwhile, Headquarters legal section, Mysore have also filed a petition in High Court of Karnataka against M/s KSFC seeking a share of the auction proceedings for appropriation towards pending arrears. Shree Ganesh Gears: 2- cases: sick unit registered under BIFR. Matter referred to BIFR by I division vide letter C.No. V/85/2/38/98 MPIV APP dt. 20.8.04. M/s IDBI have been appointed as funding agency for reviving the unit and to

liquidate the arrears with creditors and tax agencies and final approval of revival package is pending before Hon.BIFR. Shimoga Steels: 1- case: sick unit registered under BIFR. Matter referred to BIFR by I division vide letter C.No. V/3/4/ 2003 Tech dt. 7.1.05. M/s Canara Bank have been appointed as funding agency for reviving the unit and to liquidate the arrears with creditors and tax agencies and final approval of revival package is pending before Hon.BIFR. Cases with CESTAT: 1 No’s 1.Mysore Rubbers: Unit is closed.wrong availment of Notfn. No. 175/86 manufacture of branded goods. Party has predeposited Rs.0.02 lakhs. Stayed by CEGAT vide No. 621/94 dt.18.8.94. Headquarters Appeals Section have been requested to file a miscellaneous application for early hearing before Supreme Court and the same was done during January 2007.

IAR STATEMENT as on January 2007 AUDIT NOTE

UNIT

PERIOD

PARA NO.

COMPLIED VIDE O.C

STATUS

600/16.12.05, pending closure 128/05 SAGAS AUTOTEC 8/04 to 7/05

36/05

TRIVENI ENGG.

6/04 to 1/05

1 to 3

3 Supplementary issue 1

Supplementary issue 2

620/26.12.05

pending closure

85/1.3.06

pending closure

267/27.5.05.

pending closure

541/7.11.05

SCN issued by ADC, Mysore. Pending adjudication.

566/18.11.05 Draft SCN submited. Pending closure.

213/26.4.05 31/05 MYSORE POLYMERS 5/04 to 1/05

221/06 MYSORE POLYMERS 2/05 to 12/05

pending closure

5 and 6

observation no.3

335/6.7.05 360/21.7.05 572/28.11.05 306/06/21.8.06 Draft SCN submited. Vide Oc 355/06

Dated 27.9.06. Pending closure 424/23.8.05 71/05

GANESH GEARS

1/03 to 3/05

pending closure

1,2,3

599/16.12.05

UNITS OF RANGE `Metagalli East’ Name of the Unit

SSI/Non-SSI

Commodity Manufactured

01 02 03 04

Major over one crore M/s. Geep Batteries(I)LtdNon-SSI M/s. Triveni EngineeringNon-SSI M/s. Mysore Polymers Non-SSI M/s. Bhoruka Aluminium Non-SSI

Dry cell Batteries Gears & Gear Boxes Tubes Aluminium Extrusions

05 06 07 08 09. 10 11.

Non SSI < one crore M/s. Sagas Auto Tech Non-SSI M/s. Sri Ganesh Gears Non-SSI M/s. Pragathi Mekem-II Non-SSI M/s. Rishi Polymach Non-SSI M/s. Sai Cartons Non-SSI M/s. Cubic systems Non-SSI M/s. Glaxo Smithkline pharma Non-SSI Ltd Closed

LPG/CNG Kits Gears Plant Grouth Regulator HDPE Pipes & Fittings Corrugated Boxes PCB/Cable Assembly unit

12. 13. 14. 15. 16. 17. 18. 19. 20

SSI duty paying M/s. Garden Plast SSI M/s. Deep Oxygen SSI M/s. Best Cartons SSI M/S. AVR Electronics SSI M/s. Ess Enn Engineering SSI M/s Supreme plastisizer SSI M/s Karnataka veeneringSSI M/s Ravi Industries SSI M/s Perfect Inds SSI

Plastic Bottles Dissolved Acetylene Corrugated Boxes Energy Monitoring Systems Motor Vehicle accessories Di methyl phthalate Veeneer sheets Rought castings Printer parts

21 22

SSI under exemption M/s. Kodagu Foods M/s. Kanva Industries

Mango Pulp, Mango Slice Artian Drafting film

SSI SSI

END

M/S Supreme Plasticisers Ltd :- Who are involved in the manufacture of Di-methyl pthalate are an SSI unit paying full rate of duty. It is noticed that during 2005-06 upto December they had paid Rs 7 Lakhs in PLA whereas they have not paid anything in PLA in the current year upto December. This can be attributed to increased availment and utilization of CENVAT by 89%. This is due to the fact that the assessee heavily depends on the procurement of a critical raw material called pthalic anhydride which is made out of the primary raw material called orthoxyline. The pricing of Orthoxyline is directly related to international crude oil prices and accordingly increased cost of Orthoxyline will directly affect the cost of procurement of pthalic anhydride. Consequently, to avoid the impact of increased fluctuation in the International pricing of crude oil on procurement cost of pthalic anhydride, in the current year the assessee has made increased procurement of pthalic anhydride due to which they have earned increased CENVAT Credit.